An FMV lease is an operating lease in which lessees pay fixed monthly payments for a set period of time. At the end of the agreement, the asset may be purchased at the fair market value (FMV). This type of lease is flexible and beneficial to lessees, as they aren’t subject to unpredictable fees and they may choose to upgrade their asset at the end of the lease term.
Fair market value is defined as the price that something would get in an open market under normal conditions. Fair market value is a hypothetical price.
FMV leases have many benefits, including fixed monthly payments that may help the lessee stay within budget. At the end of the lease, the lessee may still obtain the vehicle or equipment by paying the fair market value, as determined at the time of the lease ending. FMV leases can also be a great option for those who will want to upgrade or switch out their vehicle when the lease ends.
TRAC leases allow the lessee to determine an agreed upon residual value. These leases are a great option for those businesses who intend to purchase their vehicle or equipment at the end of the agreement. An FMV lease allows the lessee to purchase the vehicle or equipment for what is determined to be a fair market value. Thus, FMV leases may be better suited for those seeking low payments and may not intend to keep using the same vehicle or equipment.